Tax Rules Affecting the Military, Part 2 Taxable Income

Tax season is drawing to an end, and you’ve only got about 2 weeks to complete your taxes before the end of the year. Fortunately, there are several places that provide free tax preparation for military members. If you are looking to do your own taxes, it helps to know which pay and benefits are taxable, and which are not.

Military pay is confusing. There are a lot of different rules regarding military pay and which benefits, bonuses, and special pays are taxable and which are not. This series of articles will focus on clearing up some of the confusion.

Taxable military benefits

As a military service member, you earn money from several different allowances and benefits, and there rules regarding which of these must be reported to the IRS as income and those you can exclude.

The following items must be included in your reported gross income unless they were earned while you were serving in a combat zone. The good news, is that military taxpayers who receive tax-free combat pay can continue to include it as earned income when determining the Earned Income Credit and Additional Child Tax Credit, and for purposes of making an IRA contribution.

Basic pay

Active Duty Pay, Reserve Training, and Guard Drill Pay

Attendance at a designated service school

Back wages

Special pay

Aviation Career Incentive

Diving Duty

Foreign Duty

Medical, Dental, Pharmacy, Optometry, and Veterinarian pay

Nuclear-Qualified Officers

Special-Duty Assignment pay

Bonuses

Enlistment / Reenlistment

Officer

Career Status

Overseas Extension

Other payments

High Deployment Per Diem

Accrued leave

Personal money allowances paid to high-ranking officers

Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program (certain exemptions may occur if you serve in a combat zone during the repayment period).

Please keep in mind this list is not an all-inclusive list and it is subject to change. Always check with an accountant or your base finance office for further details.

Join Our FREE Newsletter

Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.

Mina, Military pay and benefits are different than veteran pay and benefits. Typically, military retirement pay is taxable income at the federal level, and at the state level for some states (some states either don’t have income tax, or they exempt retirement pay or pensions from state income taxes). VA service-related disability compensation is a non-taxable income.

Follow us

Join Our FREE Newsletter!

TheMilitaryWallet.com is not connected with the Department of Veterans Affairs or any government agency and is for informational and entertainment purposes only. The content on this site should not be considered professional financial advice. References to third party products, rates, and offers may change without notice. We may receive compensation through affiliate or advertising relationships from products mentioned on this site. However, we do not accept compensation for positive reviews; all reviews on this site represent the opinions of the author.